Fixed Income

France is in the news again. Prime Minister Lecornu became the latest casualty of the French politics saga that began just over a year ago when president Macron called a surprise early election.

As investors face tariffs, muted growth, and geopolitical risk, the Fixed Income team explains how emerging-market investment-grade bonds can provide yield and global diversification.

Tight spreads and elevated supply are often key signs that fixed income markets are overheating. Despite these all being present within the European High Yield market today, the underlying data points to a more measured backdrop characterised by the printing of high-quality new issues, improving credit fundamentals and a stubbornly supportive technical background, offering investors reassurance over the medium-term future of the asset class.

In November 2023, we estimated that holding cash, as opposed to staying invested, could cost investors 10-30% over a three-year period. At the time, we highlighted that interest rates had reached their cyclical peaks and were likely to decrease from that point.

Oracle priced an $18bn six-tranche (5yr/7yr/10yr/20yr/30yr/40yr) bond deal which was increased from an initial $15bn on the back of exceptionally strong demand. It is the latest sign that the AI investment boom, long the focus of equity markets, is now spilling into credit.

With the Fed’s stance suggesting it is prioritising growth over sticky inflation risks, volatility in longer dated bonds is likely to persist and the case for increasing duration in fixed income is not compelling.

You can now watch the replay of our webinar: The new multi-plural world: Macro divergence meets yield

Felipe Villarroel delivered the keynote address at TwentyFour Asset Management’s Annual Conference in London on September 9, 2025.

Accelerating rating upgrades and renewed inflows into the asset class are likely to support EM spreads relative to their historical levels and other credit markets. Absent a major global shock, we expect EM bonds to remain resilient, offering stable carry even if capital appreciation becomes more difficult to capture.

With strong fundamentals, broad region and sector diversification, and a track record of weathering financial crises, emerging-market investment-grade (EM IG) bonds have evolved into a high-quality asset class, in our view. Yet, despite a robust risk-return profile, EM IG remains significantly underrepresented in actively managed, dedicated strategies.

Strong performance of EM local currency bonds has been driven by a bearish US dollar and fundamental factors supporting sustainable appreciation toward a stronger equilibrium.

The next few days could be pivotal to any concerns around the independence of the US Federal Reserve (Fed).